5
NGCM FOR IRE RECOSD
SUBJECT; Briefing of Ambassador Stoessel
The attached Briefing materials wereNTO/USSR. The materials were part
riefing of Ambassador Stoessel, USthe USSR. The data were prepared and
and
wore participants in the briefing.
cia historical review program release as sanitized
5
THE SOVIET CHAIN DEFICIT
Vr incipal Findings
Our current estimate ot Soviet grain production in
illion tons foils aboutillion tons
short of requirements for*
The USSR has so far purchased*2 million tons of foreign grain. Assuming the United States will limit sales to the current ceiling ofillion metric tons, we estimate the Soviets will be able to gain access to aboutillion tons of grain for delivery during In addition, Moscow undoubtedly will draw down grain slocks, which we believe do notillion tons and may be considerably less. These two factors, taken together, narrow the difference between available supply and requirementsinimum ofillion tons. If carryover stocks from5 are in0 million range and if we have underestimated the drought damage to the non-grain forage crops, tho supply-demand gap could be as muchillion tons.
* Fiscal years in this paper refer to theulyprevious year toune of the stated
The Soviets presumably will have to take aof unpalatable steps: (a) negotiateurther relaxation of the current ceiling on us grain, (b) contract for additional grain from the United States (up to the logistical limit ofillion tons annually), (c) import additional quantities of soybeans from the United states and Brazil, (d) increase meat-imports, (o) reduce the quality of bread, (f) cut livestock feed rations, and (g) slaughter additional livestock.
Although the Soviet government, with its commitment to raising living standards, will be very reluctant to take several of the stops above, it will have no Indeed, belt-tightening measures such as distress slaughtering have already begun.
A reduction in requirements ofillion tons by way of decreasing the use of grain for feeding livestock would be equivalent to reducing moat (pork) productionillion tons. etback of this magnitude in moat output (orlend of reductions in other livestock products as well as meat) is equivalent toourth of calendar year4 production.
We would expect tho peak of the impact on domestic availabilities of livestock products to come between March and If official policyeduction in hog and poultry inventoriesthe primary
grain consumersrathereduction in feed rations perpeak period of depressed availabilities of livestock products will probably be delayed to the last half of
The acceptance of the less likely, but possibly higher grainoillion ton range) would have a
potentially more severe impact on livestock production.
adjustment scenario may focusoderate reduction in
cattle herds as well as hogs and poultry. Not only would thisurther dampening effect on output ofproducts in the last halfut, because of the longer period required for rebuilding cattleull recovery to5 levels of production could be delayed until the last half of
There are certain to be widespread repercussions under either lower or higher assumptions concerning the6 grain deficit. The crop failure will have an impactide range of matters: the consumer program, formulation of the next five-yearrogram for the Party Congress in February, and relations with the West, Debate andamong the leadership are likely to become more heated on many issues.
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thirds of the USSR's rivestock feed*atillion more tons of grain may be required to feed livestock.** The lost forage added to the normal grain requirementsotal grain needs to roughly
illion tons (soa Table).
The quantity of grain required, however, cannot be directly balanced with the estimated gross output. The USSR reports grain productionbunker" weight
hat is, as the grain comes from the combine
before handling and transportation losses occur. At
Important forage crops include% of total feed unitshe year of most-recantreenotatoes and feed roots,nd.
Since the nutritive content (or "feed-unit" value) varies by typo of grain, the conversion from forage into grain equivalent depends on the type of grain available for feeding. Because corn is the roost likely feed grain to be imported we havo expressed tho forago cropin "corn equivalent." The calculation is based on hay and silage losses only. It docs not include anof possible loss of pasture food.
unker weight includes excess moisture, trash, dirt, weed seeds and grain admixtures, all of which are reduced to acceptable standards in several stages from farm to user.
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USSR: Estimated Production and Requirements of Grain
6
Million Metric Tons
Fiscal Year Feed Food c/ Seed
IaT TW
/ 60 27
a/ Mean of the estimated rangeillion tona of production.
b/ War to and loss rate of roughly lit applied to production. This, includes an estimatedandling lots factor (transportation and storage) and an estimatedaste factor resulting from excess moisture and extraneous matter included in the bunker weight measurement of grain (see text). The average exaggeration for theame to
c/ Our estimates of the quantity of grain required for food are baaed on production data for flour and groats.
d/ Including an allowanceillion tons of corn equivalent for losses of forage crop (see text).
e/ This deficit2 million tons of usable (net) grain is derived by the following steps: (a) "inflating" the total requirementsillion tonsotalillion tons, the amount of grain required to be reported in official Soviet torms (seeivided; (b)ross difference2 million metric tons by tubtracting the gross productionillion tons (columnillion tons; (c) reducing this gross difference2 million metric tons by theaste factor (seeo2 million tons, the amount of grain required net of extraneous matter but gr^sg1 handling losshe amount of "clean" grain required to be imported to cover the deficit.
the same time, uses shown in the table are givenleaned and standardized basis. Therefore, to begross production must be discounted to exclude waste and losses.
Although tho discount varies from year to year, evidence indicates that grain, productionas measured in standard conditionhas beeness than reported. The average exaggeration foryear period has been In addition, roughlyf the reported production is lost in handling and
If the2 million tons) of our current production estimateillion tons is realized, and if we have correctlyormal requirements, "losses" caused by exaggerated production data and in handling,he possible grain deficit caused by forage losses, the total gap will2 million tons as shown in the tablo.
So far, during FY.he USSR has contracted for2 million tons of foreign grain. The US ceiling on further Soviet purchases, taken together with the extremely tight international grain market, will probably limit USSR imports to roughlyillion tons. In addition, the Soviets undoubtedly will draw on stocks, which we
believe do not exceedoillion tons.* This would narrow the gap between expected current supply (expected production net of losses and waste, plus expected purchases ofillion tons, plus the use ofillion tons of stocks) and requirements toillion tons.
This estimate of the remaining, gap between grain requirements and production is ntoro likely to be too low than too high.
estimate of current requirements is conservative. It allows foroderate increase in livestock feed supplier, considering the trend in livestock numbers. Moreover, drought damage5 forage crops may have
greater than estimated above.
mentioned above, we believe our allowance for drawdown of stocks may be too high.
*" Stocks could be substantially less. Less is known about Soviet grain stocks than any other aspect of the supply and demand situation. The quantity held in reservetate secret, protected by law. Estimates must be derived by balancing uses against production and imports using less-than-adequate data and requiring arbitrary assumptions for some important factors.
Dealing With tho Supply-Demand Gup
Moscow will have to make substantial adjustments to cope with the shortfall of at leastillion tons. Their options include the following:
the quality of bread (as Khrushchev did following the3 harvest) with
saving ofillion tons
i
of grain;*
cut livestock inventories% reduction in total herds and flocks would lower the demand for'feodgrains byillion tons);
redupe feed rations per head of livestock while maintaining the current livestock inventoryer-head ration cut to
evel would roughly save
illion tons).
a Increase moat importsillion tons
4 imports). This quantity
dditional*
of total meat supplies, is available
(outside the United States) and would
* increasing the amountflour milledon of grain to3 level willillion ton gross saving of grain. However, thereillion ton offset because of tho loss of milling byproducts for feeding livestock.
reduce grain demandillion tons.
more groin from the United Statos than theillion tons scheduled under the current ceiling.' Given our estimated import capacity limit ofillion tona in6 for Sovietaximum of
6 million tons additional grain could be imported,*"
i
additional soybeansbeyondillion tons purchased to
dateto stretch feed grainlthough the Soviet government, with its commitment to raising living standards, will be very reluctant to take several of the steps above, it will have no Indeed, belt tightening measures have already begun. These are impinging largely on livestock, which normally
Bctore tha lifting of the US moratorium in October, the Soviets had purchased aboutillion tons of US-origin grain. Although the US hasimit of anillion tons on now sales, the Administration is willing to consideraterequest for larger purchases during tho current marketing year endinq on
** Assuming reasonable scheduling, ports in tho USSR can handle up toillion tons of grainear. The domestic transport system can manage grain shipments ofillion tons at the cost of diversion of freight cars from other uses and consequent short-term economic disruptions. The hard currency outlays for2 million tonsurchased to date come to roughly
S4 billion. If the Soviets obtain access to the "logistical limit" ofillion tons, expenditures would be on tho order2 billion.
*** Soviet grain and oilseed buyers have indicated that theyillion tons of soybeans to bo equivalent in feeding valueillion tons of grain.
consume half the grain crop. Distress slaughtering of
livestock, mainly hogs, began in August and
through September and presumably October. Asctober,
the above-average slaughter of hogs had reduced numbers
illion head in tho socializedelow a
year earlier. Hog numbers are dropping more rapidly than
pork production figures indicatej animals arc being
slaughtered at lower-than-normal weights, thus avoiding
the intensive grain feeding of the final stages of
fattening. Scattered information on meat production in
the important private sector shows that distress
slaughtering of cattle is under way. Because of the
lighter-than-average weights of the animals currently
being slaughtered, however, tho expected short-term
benefit for the consumer from additional meat supplies
is only being partially realized."'
Although there is no evidence that tho Soviets have made large purchases in the near term from Wostern suppliers, there are reports of recent inquiries for large0 tons) of Argentine beof. If purchases are not consumated during the balance
" Based on the total liveweight of animals sold topacking plants during September, we do not expect meat production in Octoberdata not yet releasedto be substantially above the same month last yoar.
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Moscow almost certainly will contract for largeforeign meatmple supplies of whichto be available from Argentian, Australia,EC. Purchasesillion tonsdoubleould cost the Soviets close toillion
there hasecline in the quality of breadise in the milling rate) as well as bread shortages; however, there is no supporting evidence to date. We believe the leadership would only with great reluctanceolicy degrading the average quality of bread and/or restrict the sale of broad and flour in retail stores.*
The Impact on Livestock Productionhe Outlook
A reduction in requirements ofillion tons by way of decreasing the use of grain for fooding livestock would be equivalent to reducing meat (pork) productionillion tons. etback of this magnitude in meat output (orlond of reductions in other livestock products as well as meat) is equivalent toourth of calendar year4 production.
* These measures, employed by Khrushchev following3 harvest failure, were not adopted by the Brezhnov-Kosygin regimeomparable harvest shortfallS.
Wo would expuct the peak of the impact on domestic availabilities of livestock products to come between March and If official policyeduction in hog and poultry inventoriesthe primary grainrathereduction in feed rations per head, the peak period of depressed availabilities of livestock
products will probably be delayed 'to the^last half of
Tho acceptance of the less likely, but possibly higher grain0 million ton range) wouldotentially more severe impact on livestock production, especially in the longer run. Under this assumption, the adjustment scenario may focusoderate reduction in cattle herds as well as hogs and poultry. Not only would thisurther dampening effect on output of livestock products in the last half ofut, because of the longer period required for rebuilding cattleull recovery to the5 rate of production could be delayed until the last half of
There are certain to be widespread repercussions undor either lower or higher assumptions concerning the6 grain deficit. The crop failure will have an impactide range of matters: the consumer program, formulation of tho next five-yearrogram for the
Original document.
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